In the United States and throughout the world there are traditional exchanges for trading securities. In the United States these exchanges would include the New York Stock Exchange, NASDAQ, and American Stock Exchange. In Asia, it would include the Australian Securities Exchange, Taiwan Stock Exchange, the Hong Kong Stock Exchange, Shenzhen Stock Exchange, Tokyo Stock Exchange, and Stock Market Division of Korea Exchange. In Europe, it would include the London Stock Exchange, Paris Bourse, Frankfurt Stock Exchange, and SWX Swiss Exchange. In South America, it would include the Rio de Janeiro Stock Exchange, Santiago Stock Exchange, Jamaica Stock Exchange, and Caracas Stock Exchange. Normally, each of these exchanges would be approved under the appropriate governmental laws and regulations, and organized so that its members would be able to trade common stock in listed companies. These traditional exchanges are called “Displayed Markets”. Displayed Markets provide price quotes for transactions on that venue to the market at large.
In recent years, dramatic increases in the capability of computer and telecommunications technologies, changes to the organizational structure of large market participants as well as changes to the national market structure precipitated by regulatory changes have caused the emergence and growth of a variety of electronic equity trading venues that capture order flow. With barriers to entry in the industry substantially lower, innovative entrepreneurs are also able to offer traditional order matching and execution services faster, and cheaper providing certainty of order fulfillment sooner. These trading venues consist of internalized order flow at broker-dealers, Electronic Communication Networks (ECNs) and Alternative Trading Systems (ATSs). Many of these venues are also a “Non-Displayed Market” where buy and sell orders cross without the benefit of publicly available quotes. These Non-Displayed markets are commonly referred to as “dark pools” of liquidity.
While the proliferation of these liquidity pools expand investors' options in choosing a trading venue that best suits their needs for a particular order, this growth has also caused market fragmentation. The result is that getting a large order executed without an impact to the securities market at large has become very difficult.
Until the present invention, traditional securities exchanges and dark pools (a/k/a Displayed and Non-Displayed Markets) have operated as separate trading facilities.
Investors desire access to liquid, high quality markets, as well as speed and certainty of execution without market dislocation. The present invention provides a solution to the problem by allowing Displayed and Non-Displayed to interact without a dislocation to the market.